Stock and Share Brokers

Brokers handle most of the buying and selling on the stock market, and the average
investor will use a brokerage service to handle his trades. There is a broad range of
brokerage services available. There are brokers who offer many services for aiding their
clients meet their investment goals. These 'full-service brokers' can give advice about
which stocks to buy and sell and often have full research facilities for analyzing market
trends and predicting movements.

These perks are not free – full service brokers charge the highest commission rates in the
industry. Whether or not you decide to use a full-service broker depends on your level of
self-confidence, your knowledge of the stock market and the number of trades you
regularly make.

Investors who wish to save on commission fees can use a 'discount broker'. These
brokers charge much lower commissions but don't offer advice or analysis. Investors who
like to make their own trading decisions and those who make many trades often use
discount brokers for their transactions. Some traders may use both types – there is no
reason why you can't have two brokers.

The least expensive way to trade stocks is usually with an online brokerage. Both fullservice
and discount brokers usually offer discounts for orders placed online. Some
brokers operate exclusively online and offer even better rates.
No matter what type of broker you choose, you must first open an account. Each broker
sets their own requirements for maintaining an account balance but it is usually between
$500 and $1000. When choosing a broker look at the fine print and find out about the fees
involved. Some brokers charge an annual maintenance fee while other charge fees
whenever your account balance falls below the minimum.

There are two basic types of brokerage accounts. A 'cash account' offers no credit – when
you buy you pay the full amount of the stock price. A 'margin' account, on the other hand,
allows you to buy stock 'on margin' – the brokerage will carry some of the cost of the
stock. The amount of margin varies from broker to broker but the margin must be
protected by the value of the client's portfolio. If the portfolio falls below a specified
amount the investor will have to add more funds or sell some stock. Margin accounts
allow investors to buy more stock with less cash thereby realizing greater gains (and
losses). Because they involve more risk than cash accounts, margin accounts are not
recommended for inexperienced traders.

Before choosing a particular broker the investor should carefully consider his needs.
Does he wish to receive advice about which stocks to buy? Is he uncomfortable making
trades on the Internet? If so, he should go with a full-service broker. Technology savvy
investors who have the knowledge and confidence to make their own trading decisions
are better off with a discount broker.

After deciding which type, compare a few competitors. There can often be significant
differences in costs when all the annual fees and brokerage rates are factored in. Try to
gauge how many trades you expect to make in a year, how much cash you can deposit
into your account, whether you wish to use margin accounts and which services you
need. This information will allow you to compare the actual costs of various brokers.